Transcript:
In today’s training, we’re going to be reviewing the Lump Sum Need Insight, which answers a slightly different planning question:
“How much would I need as a one-time amount to fully fix this plan?”
To get started, go to the Insights section of the plan.
From here, use the search tool to find Lump Sum Savings, then select the insight to open it.
The Lump Sum Savings Insight calculates the amount required at a specific point in the timeline to eliminate any future shortfalls in the plan.
The lump sum is first used to cover expenses in the year it is added, and any remaining amount is placed into a Needs Analysis Account.
In this example, we can see that the plan requires a lump sum of over $2 million to prevent the shortfall that was originally occurring.
Next, let’s look at the comparison view.
If we open the Compare Plans view, we can see that the insight is preventing a shortfall of approximately $396,000 during the clients’ later retirement years.
We can also review how this works in more detail in the Year View.
To do this, go to the Investments tab within Year View.
Here, you’ll see the Needs Analysis Account that was automatically created by the insight.
You’ll also find the original lump sum amount that is needed to prevent the shortfall in the plan.
As you scroll through the timeline, you can see how the account grows over time.
Then, once the plan reaches the years where shortfalls would have occurred, the account begins drawing down to cover those deficits.
You can also see exactly how much is being used in each shortfall year and when the account is no longer needed.
In this example, the plan stops requiring the lump sum at age 80, which is year 2048 in the plan.
It’s also important to note that this account grows based on the plan’s default investment growth rate, which in this example is 5.5%.
If needed, you can adjust this assumption within the Plan Settings.
This insight can be a really useful conversation starter with clients when discussing whether adding a one-time amount to the plan could help resolve future cash flow issues or improve retirement sustainability.
If you do have any questions about the Lump Sum Need Insight, please feel free to reach out to our support team.